India's ambitious steel production plan thwarted by slow consumption

Industry participants surveyed by Platts expect steel demand to rise 4-5% this financial year to 80 mt. It added Indian steel capacity increased by 46% over the previous five years to about 110 mt a year during the fiscal ended March 2015 from levels of 75 mt/year in fiscal 2010Megha Mandavia | ET Bureau | December 17, 2015, 17:41 IST

MUMBAI: Commodity pricing agency Platts said India's ambition to increase annual steel production to 300 million tonne (mt) by 2025 has been thwarted by slower than expected growth in consumption.

Industry participants surveyed by Platts expect steel demand to rise 4-5% this financial year to 80 mt. It added Indian steel capacity increased by 46% over the previous five years to about 110 mt a year during the fiscal ended March 2015 from levels of 75 mt/year in fiscal 2010.

"Further propelling the overcapacity problem is the new capacity being completed by companies such as Tata Steel, Steel Authority of India Limited and JSW Steel, which will result in an additional 12-14 mt becoming operational in the current fiscal," it said in a report.

Steel demand in India is weak due to a slump in the construction, capital goods and automobile sectors, which are the main consumers of steel. This has resulted in estimated capacity utilization for integrated steelmakers in India falling to 81% in last fiscal from 88% five years back.

"China and Brazil built up steel capacity on the basis that it would easily be absorbed by ongoing urbanization and development," Platts report said. "Is India - already the world's third-largest steel producer - in danger of making the same mistake? Why look to treble production capacity when current utilization rates are not much above 80%?"